IMF told that amid 'new mediocre' no room for mistakes by central banks

Thu Oct 8, 2015 8:48pm EDT
 
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By Randall Palmer and Krista Hughes

LIMA (Reuters) - Central banks have little room for error in a low-growth world in which over-leveraged and commodity-dependent emerging economies and a slowing China are major risks, top international financiers told the International Monetary Fund's meeting.

Despite $7 trillion in quantitative easing from banks in industrial nations since the global financial crisis, the world is stuck in a "new mediocre" growth pattern, IMF chief Christine Lagarde said on Thursday.

In a bid to shore up finances and punish companies that arbitrage tax regimes, governments pushed ahead with plans to improve tax collection.

The IMF meeting comes as the Bank of Japan looks poised to extend its money printing program, known as quantitative easing, as it stares down the barrel of a fifth year of recession.

The European Central Bank is also expected to extend quantitative easing, while the two major central banks closest to raising rates, the U.S. Federal Reserve and the Bank of England, are holding their fire.

"It is not the kind of economy in which you can make a mistake," Bank of England Governor Mark Carney told the meeting.

For both the Fed and the Bank of England, inflation targets are far out of reach, although both central banks insist they are ready to hike rates. The Fed's chair, Janet Yellen, has said the U.S. central bank is on track to raise rates this year.

Markets, however, are not pricing in hikes until next year for both.   Continued...

 
International Monetary Fund (IMF) Managing Director Christine Lagarde speaks during a news conference during the 2015 IMF/World Bank Annual Meetings in Lima, Peru, October 8, 2015.   REUTERS/Mariana Bazo